As per the rumors circulating for just a few days, activist investors,
and disgruntled shareholders have ousted Sprint CEO Gary Forsee. There
are three main reasons for the ouster — and not all of them make sense.
- Sprint has a relatively high churn rate among the majors, and is
acquiring new customers much more slowly than chief wireless rivals AT&T
and Verizon. For the next quarter, Sprint has issued guidance that they
will suffer a net loss of over 300k subscribers, which is atrocious in a
time when AT&T and VZW are net adding about 1.5M each. There seems to be
no resonating marketing message, and the brand is suffering.My take: This is a problem that can be blamed on Sprint
management and marketing execs, and possibly right up to Forsee. Sprint
needs to find a message that resonates with customers, stick to it, and
rebuild the brand. Realistically, their service is scarcely better or
worse than the other oligopilists, but the perception is that it is
worse. - The Nextel merger is not going as well as expected, with delays in
integration, and frustration and churn among Nextel’s formerly loyal
blue-collar Push-to-talk (PTT) base. Prior to acquisition, Nextel was the
goose that laid golden eggs, with ~$70 ARPU, but that goose is plucked.My take: The roots of this problem stem from the “Nextel
Spectrum Swap” that was in motion long before Sprint stepped in. Nextel
is vacating spectrum that it promised not to use because it was
interfering with Public Safety radios in the 800MHz band. As it vacates,
existing Nextel users are getting crammed into a smaller band, and
quality is suffering. The only cure is to speed up the rollout of EV-DO Rev.A, and get
Nextel users migrated to PTT services over CDMA. Sprint is showing every
sign of doing this, so is there any executive culpability? Perhaps the
Nextel merger was simply ill-conceived, and overpriced. - Investors are not thrilled about Xohm, Sprint’s big venture into
WiMAX service at 2.5GHz.My take: This is a serious fundamental disconnect between
investors and management. The Xohm effort is something I earlier
described as follows: “Sprint’s 2.5GHz strategy is tied in my
mind for “gutsiest US telco project” with Verizon’s FIOS project. If
Sprint succeeds, they will have a sustainable advantage that their
competitors cannot easily copy (for lack of spectrum).”The disconnect is that investors in Sprint are risk-averse,
Blue-chip, dividend seekers. They invested in Sprint when it was a
utility company. But Sprint’s “gambit” into WiMAX has taken them way out
of the “utility company” comfort zone — and the reaction of the
investors is as expected. With Xohm, Sprint’s risk profile is looking
more and more like a big tech firm, say Yahoo or Apple. Today’s Sprint
needs risk-seeking investors, not fixed-income seekers. Of course, the
result is that Sprint is churning investors faster than it churns
subscribers. And it’s easier to lose old investors than to gather new
ones.Perhaps existing investors would rather see Sprint sell off its
2500MHz spectrum to some VC, private equity-backed group that could take
the risk, and pay a dividend to shareholders. But that doesn’t make sense. It’s exciting to finally
see a telco do something bold, take risks, and…yes…even get a bit
desperate. Because it is in desperation that the telco will break ranks
and do radical things, like give the customer what it wants. Xohm
promises no long contracts, open-access to any compatible device, ample
bandwidth, and reasonable and varied pricing plans. Damn, does that
sound like a breath of fresh air! Techdirt is firmly in the camp that so
doing, a telco would actually INCREASE the value of their products, and
grow profits.
By no means is Xohm a slam dunk. WiMAX is, as
yet, largely unproven. Timing is essential, and any significant delays
will reduce the Sprint advantage. But an early success would radically
change the wireless landscape, and could not be readily copied by
competitors. In Sprint, we have the best of the capitalist system, where
the effort could succeed or fail, but in pushing the envelope by merely
entering the race, things are better for all consumers. Forsee or not, I
hope Xohm lives on.
